The school notified Curley his contract would not renewed when it expires in June, university spokesman Dave La Torre said in a statement.
Curley and retired vice president Gary Schultz are scheduled to stand trial in January in Harrisburg, Pa., on the perjury and failure to report charges. Both men have denied the allegations against them.
Sandusky, a former assistant football coach, is serving a minimum 30-year prison sentence for molesting 10 boys.
Curley was charged in November. The school has paid about $2 million so far for the legal defense of Curley, Schultz and former president Graham Spanier.
La Torre said Tuesday the school's decision not to renew Curley's contract would have no impact on Penn State's continuing to cover Curley's legal expenses. La Torre declined further comment, citing a personnel issue.
A message was left for Curley's attorney, Caroline Roberto.
A 1976 Penn State graduate, Curley began his stint as athletic director in December 1993. He was a walk-on football player and then recruiting coordinator under the late head coach Joe Paterno before becoming an assistant athletic director in 1981.
David Joyner stepped down from his post as a Penn State trustee and became the acting athletic director after Curley was placed on leave last year. School president Rodney Erickson said last month that Joyner would stay on as acting athletic director as long as he remains in office.
Erickson has said he plans to step down when his contract expires in June 2014, and that it was appropriate for his successor to determine whether to go in another direction with athletics.
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